Question 1

How many years will it take $100 to grow to $1,000 with an annual interest rate of 8 percent?

Accepted Answer

A)  9.00 years 
B)  10.00 years 
C)  29.92 years 
D)  33.35 years 
A)  9.00 years 
B)  10.00 years 
C)  29.92 years 
D)  33.35 years

Question 2

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

Accepted Answer

A)  $45.67 
B)  $64.17 
C)  $177.95 
D)  $220.00 
A)  $45.67 
B)  $64.17 
C)  $177.95 
D)  $220.00

Question 3

Compute the present value of $3,000 paid in four years using the following discount rates: 3 percent in year 1,4 percent in year 2,5 percent in year 3,and 6 percent in year 4.

Accepted Answer

A)  $1,998.73 
B)  $2,109.14 
C)  $2,491.28 
D)  $2,516.26 
A)  $1,998.73 
B)  $2,109.14 
C)  $2,491.28 
D)  $2,516.26

Question 4

What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must be repaid in year 8?

Accepted Answer

A)  6.36 percent 
B)  7.12 percent 
C)  8.54 percent 
D)  11.62 percent 
A)  6.36 percent 
B)  7.12 percent 
C)  8.54 percent 
D)  11.62 percent

Question 5

You invested $1,000 in the stock market one year ago.Today,the investment is valued at $750.What return did you earn? What return would you need to get next year to break even overall?

Accepted Answer

A)  −112.5 percent, +75 percent, respectively 
B)  −75 percent, +112.5 percent, respectively 
C)  −33.33 percent, +25 percent, respectively 
D)  −25 percent, +33.33 percent, respectively 
A)  −112.5 percent, +75 percent, respectively 
B)  −75 percent, +112.5 percent, respectively 
C)  −33.33 percent, +25 percent, respectively 
D)  −25 percent, +33.33 percent, respectively

Question 6

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $4,500.What return did you earn? What return would you need to get next year to break even overall?

Accepted Answer

A)  −111.11 percent, +90 percent, respectively 
B)  −90 percent, +111.11 percent, respectively 
C)  −10 percent, +11.11 percent, respectively 
D)  −11.11 percent, +10 percent, respectively 
A)  −111.11 percent, +90 percent, respectively 
B)  −90 percent, +111.11 percent, respectively 
C)  −10 percent, +11.11 percent, respectively 
D)  −11.11 percent, +10 percent, respectively

Question 7

What is the value in year 15 of a $600 cash flow made in year 3 when the interest rates are 4 percent?

Accepted Answer

A)  $374.76 
B)  $888.00 
C)  $960.62 
D)  $1,080.57 
A)  $374.76 
B)  $888.00 
C)  $960.62 
D)  $1,080.57

Question 8

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

Accepted Answer

A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years 
A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years

Question 9

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

Accepted Answer

A)  $646.96 
B)  $647.88 
C)  $712.50 
D)  $868.22 
A)  $646.96 
B)  $647.88 
C)  $712.50 
D)  $868.22

Question 10

Scenario A: At age 19 you invest $1,500 that earns 8 percent per year.Scenario B: At age 30 you invest $1,500 that earns 13 percent per year.Under which scenario would you have more money at age 55 and what is the dollar difference at age 55 between the two scenarios?

Accepted Answer

A)  Scenario A, $1,085.49 
B)  Scenario A, $2,104.73 
C)  Scenario B, $4,179.36 
D)  Scenario B, $7,893.55 
A)  Scenario A, $1,085.49 
B)  Scenario A, $2,104.73 
C)  Scenario B, $4,179.36 
D)  Scenario B, $7,893.55

Question 11

Approximately what interest rate is needed to double an investment over eight years?

Accepted Answer

A)  8 percent 
B)  9 percent 
C)  12 percent 
D)  100 percent 
A)  8 percent 
B)  9 percent 
C)  12 percent 
D)  100 percent

Question 12

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Accepted Answer

A)  8.45 percent 
B)  10.00 percent 
C)  10.67 percent 
D)  12.50 percent 
A)  8.45 percent 
B)  10.00 percent 
C)  10.67 percent 
D)  12.50 percent

Question 13

Approximately what rate is needed to double an investment over five years?

Accepted Answer

A)  8 percent 
B)  12.2 percent 
C)  14.4 percent 
D)  15.8 percent 
A)  8 percent 
B)  12.2 percent 
C)  14.4 percent 
D)  15.8 percent

Question 14

You borrow $3,500 and will pay back the entire amount in five years.You are charged 9 percent interest per year.How much interest do you pay on this loan?

Accepted Answer

A)  $1,885.18 
B)  $1,907.35 
C)  $1,959.02 
D)  $2,106.81 
A)  $1,885.18 
B)  $1,907.35 
C)  $1,959.02 
D)  $2,106.81

Question 15

A deposit of $1,000 earns the following interest rates? 8 percent in the first year,
7 percent in the second year,and
8 percent in the third year.
What would be the third year future value?

Accepted Answer

A)  $1,082.15 
B)  $1,230.00 
C)  $1,248.05 
D)  $3,030.00 
A)  $1,082.15 
B)  $1,230.00 
C)  $1,248.05 
D)  $3,030.00

Question 16

A $2 million deposit earns 7 percent for 13 years.If the account earns 9 percent per year forever after that,how long will it take to grow to $5 million?

Accepted Answer

A)  zero; the account exceeds $5 million after 13 years 
B)  0.26 year 
C)  0.43 year 
D)  1.18 years 
A)  zero; the account exceeds $5 million after 13 years 
B)  0.26 year 
C)  0.43 year 
D)  1.18 years

Question 17

Which of the following statements is incorrect with respect to time lines?

Accepted Answer

A)  A helpful tool for organizing our analysis is the time line. 
B)  Cash flows we receive are called inflows and denoted with a positive number. 
C)  Cash flows we pay out are called outflows and designated with a negative number. 
D)  Interest rates are not included on our time lines. 
A)  A helpful tool for organizing our analysis is the time line. 
B)  Cash flows we receive are called inflows and denoted with a positive number. 
C)  Cash flows we pay out are called outflows and designated with a negative number. 
D)  Interest rates are not included on our time lines.

Question 18

With regard to money deposited in a bank,future values are

Accepted Answer

A)  smaller than present values. 
B)  larger than present values. 
C)  equal to present values. 
D)  are completely independent of present values. 
A)  smaller than present values. 
B)  larger than present values. 
C)  equal to present values. 
D)  are completely independent of present values.

Question 19

What would be more valuable,receiving $1,895 today or receiving $3,450 in six years if interest rates are 8 percent?

Accepted Answer

A)  receiving $1,895 today 
B)  receiving $3,450 in six years 
C)  They are worth the same amount 
D)  Need more information to make a determination. 
A)  receiving $1,895 today 
B)  receiving $3,450 in six years 
C)  They are worth the same amount 
D)  Need more information to make a determination.

Question 20

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

Accepted Answer

A)  $5,290.42 
B)  $5,532.20 
C)  $5,802.82 
D)  $6,103.73 
A)  $5,290.42 
B)  $5,532.20 
C)  $5,802.82 
D)  $6,103.73

How many years will it take $100 to grow to $1,000 with an annual interest rate of 8 percent?

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

Compute the present value of $3,000 paid in four years using the following discount rates: 3 percent in year 1,4 percent in year 2,5 percent in year 3,and 6 percent in year 4.

What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must be repaid in year 8?

You invested $1,000 in the stock market one year ago.Today,the investment is valued at $750.What return did you earn? What return would you need to get next year to break even overall?

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $4,500.What return did you earn? What return would you need to get next year to break even overall?

What is the value in year 15 of a $600 cash flow made in year 3 when the interest rates are 4 percent?

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

Scenario A: At age 19 you invest $1,500 that earns 8 percent per year.Scenario B: At age 30 you invest $1,500 that earns 13 percent per year.Under which scenario would you have more money at age 55 and what is the dollar difference at age 55 between the two scenarios?

Approximately what interest rate is needed to double an investment over eight years?

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Approximately what rate is needed to double an investment over five years?

You borrow $3,500 and will pay back the entire amount in five years.You are charged 9 percent interest per year.How much interest do you pay on this loan?

A deposit of $1,000 earns the following interest rates? 8 percent in the first year, 7 percent in the second year,and 8 percent in the third year. What would be the third year future value?

A $2 million deposit earns 7 percent for 13 years.If the account earns 9 percent per year forever after that,how long will it take to grow to $5 million?

Which of the following statements is incorrect with respect to time lines?

With regard to money deposited in a bank,future values are

What would be more valuable,receiving $1,895 today or receiving $3,450 in six years if interest rates are 8 percent?

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Filters

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

How many years will it take $100 to grow to $1,000 with an annual interest rate of 8 percent?

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

Compute the present value of $3,000 paid in four years using the following discount rates: 3 percent in year 1,4 percent in year 2,5 percent in year 3,and 6 percent in year 4.

What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must be repaid in year 8?

You invested $1,000 in the stock market one year ago.Today,the investment is valued at $750.What return did you earn? What return would you need to get next year to break even overall?

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $4,500.What return did you earn? What return would you need to get next year to break even overall?

What is the value in year 15 of a $600 cash flow made in year 3 when the interest rates are 4 percent?

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

Scenario A: At age 19 you invest $1,500 that earns 8 percent per year.Scenario B: At age 30 you invest $1,500 that earns 13 percent per year.Under which scenario would you have more money at age 55 and what is the dollar difference at age 55 between the two scenarios?

Approximately what interest rate is needed to double an investment over eight years?

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Approximately what rate is needed to double an investment over five years?

You borrow $3,500 and will pay back the entire amount in five years.You are charged 9 percent interest per year.How much interest do you pay on this loan?

A deposit of $1,000 earns the following interest rates? 8 percent in the first year, 7 percent in the second year,and 8 percent in the third year. What would be the third year future value?

A $2 million deposit earns 7 percent for 13 years.If the account earns 9 percent per year forever after that,how long will it take to grow to $5 million?

Which of the following statements is incorrect with respect to time lines?

With regard to money deposited in a bank,future values are

What would be more valuable,receiving $1,895 today or receiving $3,450 in six years if interest rates are 8 percent?

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Filters